When Making Tax Digital (MTD) for VAT was introduced in 2019, it was compulsory for most businesses trading above the VAT threshold of £85,000 to keep records in digital format and submit their VAT returns using compatible software.
Smaller businesses which were VAT registered but with turnovers below the threshold were not forced to adopt MTD – but that exemption is about to come to an end, and from April next year most VAT registered businesses will be covered by Making Tax Digital.
That means that those who are still using the ‘old’ method of filing returns by logging into HMRC and manually typing the figures into boxes are going to have to change the way they do things.
There are plenty of businesspeople who enthusiastically embrace technological solutions, but who remain wedded to the familiar, tried-and-tested way of keeping their accounts. Perhaps there is a feeling of ‘if it ain’t broke, don’t fix it’; or concerns about the amount of effort involved in learning something new; or even a concern that the new system comes with a slight element of ‘Big Brother’.
Whilst it is understandable that businesses could be nervous and perhaps even daunted by the prospect of moving from manual records or spreadsheets to software, the experience of those firms which have already made the switch suggests that you shouldn’t regard MTD as a threat – but as an opportunity to improve the way you operate.
Taking your record-keeping online isn’t just about how you submit VAT returns to HMRC, but it’s about how you keep your underlying records, and how that data can help you run your business better.
There are many
benefits to cloud accounting: having up-to-date information at their fingertips
can transform the way entrepreneurs plan and monitor the progress of their
business. That information will be more
accurate, more timely and more accessible than it could ever be with
traditional record-keeping methods.
The best way to comply with the new MTD regulations, and to enjoy the fullest benefits of making the switch, is via a subscription to a proprietary cloud accounting software. This approach will mean that you will always have the most up-to-date version of the software, and that it will be fit for purpose should HMRC introduce more new regulation in the future.
More importantly, it will ensure you have the best tools to run your business – as well as saving your valuable time in inputting data. Don’t forget that this technology also allows your business advisers to give better quality advice, because it will also be based on the most accurate, up-to-date information.
It may be that MTD is the piece of red tape which forces many businesses to make the move to cloud accounting; I’m pretty confident that the vast majority will look back in a year’s time and be very glad they made the move. That is certainly the experience amongst those who have already taken the plunge.